CIBIL & Alternative Credit Scoring — A Collision or A Collaboration?
The outbreak of the devastating pandemic has brought on with it some very obvious repercussions — largely driven by a dip in the economy. This change has specifically been reflected in the banking sector, and the domains attached to it. With moves undertaken by the government to ease the monetary distress, the provision of accessible liquidity for civilians has shown a gradual uptick in the number of loans being applied for.
Swimming in financial uncertainty — Can property assets be steady anchors?
Home loans have touched a 15-year record low, but with a twist. Credit lenders are offering loans on different schemes — assessing the creditworthiness of an individual and the risk associated with lending the loan. This makes for a wise strategic step adopted by banks to expand their loan books, by reducing chances of money leakage and bad loans. CIBIL scores of applicants are considered and loan concessions are made if their CIBIL scores fit within certain predefined ranges.
This practice has been around for some time however, with the pandemic disrupting the fiscal status and abilities of people, banks and lenders have to go the extra mile to check the financial profile of their customers. As per reports, SBI offered lowered interest rates in the following slabs:
- 6.7% to customers having their CIBIL scores above 800
- 6.8% for CIBIL scores ranging from 751–800
- 6.9% for CIBIL scores in the 700–750 band.
Customers with CIBIL scores below 700 cannot avail the concessional rates and would have to pay the normal interest rates of 7–7.25% for loans over ₹75 lakh.
Seeking security in tradition — Is it time to innovate?
Traditional CIBIL scores, however, may not be able to cover all dimensions coming into play for making up the creditworthiness of customers. This is where location-based insights can help in devising an alternate credit score, which could be used conjointly with the CIBIL score of the applicant to make sound, information-backed decisions. Providing a 360° view of the applicant’s finances — be it the affluence of the neighbourhood of their residence, their bill payment history, mobile data usage, average monthly expenditure and many other factors; location intelligence has now transformed from being an additional advantage to a necessary asset for financial institutions.
This is more clearly observed in the real estate sector, wherein location intelligence can assist banks in determining the commercial activity and leasing rates, among other parameters so that loans can be offered to customers. Furthermore, banks can also work with real estate brokers to provide their customers with greater options based on their financial capability and budget, proving to be a win-win situation for all parties involved.
Thus, full advantage should be taken of the upswing in demand of property purchasing due to the shift in working scenarios and availability of liquidity by lending institutions, equipped with location derived insights!